The Employment (Allocation of Tips) Bill is closer to becoming law as it is making its way through Parliament. Employers who receive tips or service charges will soon have to make changes to their practices.
Currently, there is no legal obligation on employers to pass on tips or service charges to their workers. It is up to employers to decide whether they keep the monies or pass them on. It is estimated that around 80% of all UK tipping now happens by card, and therefore the employer in many cases receives the tips or service charge directly. When asked, many customers and workers are unaware exactly what happens to those monies. Some employers, perhaps the majority, do pass on the monies in full to their staff but some employers keep some or all of the money, or levy their own “service charge” and there is a general lack of transparency.
The simple aim of the Bill is to ensure that 100% of tips and service charges are passed onto staff.
It is expected to benefit over 2 million workers in the hospitality sector, many of whom rely on tips to top up their pay.
What the bill does
The Bill (as presently drafted) creates a legal obligation to allocate all tips, gratuities and service charges which are paid to employers or which they exercise control or significant influence over, to workers without any deductions. They must be paid to workers no later than the end of the month following the month in which the tip or service charge is received by the employer.
There will be an obligation to ensure that the distribution of qualifying tips between workers is “allocated fairly” between workers.
The government will create a statutory code of practice to which “regard must be had” by employers when allocating tips and service charges.
Employers must also create their own written policy on allocation of tips at their place of business which must set out how the employer ensures that all tips and service charges are fairly allocated. The Employer must make the written policy available to all workers at the place of business. It must also keep written records of all tips and service charges allocated to workers in the last three years and must provide this information to any worker who makes a written request for it.
The Bill gives the same rights to agency workers as it does to workers.
It also creates a right for workers to bring a claim to an Employment Tribunal that an employer has not allocated the tips and service charges to workers within the prescribed period and there is power for tribunals to order an employer to “revise an allocation” or make a payment to one or more workers or categories of workers and to award compensation of up to £5,000 to compensate a worker for any financial losses.
There is also the right to bring a claim if the employer has not provided a copy of the written policy or the written records of tips.
What should employers now do?
Act now to ensure that you will be compliant when the new requirements come into force.
Employers should audit their operations to work out which of their places of business will be affected by the new requirements and ensure that arrangements will be in place to ensure that 100% of tips and service charges are allocated to relevant workers within the time period required. There should be no deductions for breakages or to offset any other costs to the employer.
The precise detail in relation to a “fair” allocation is yet to be set out. For example, should employers simply divide the tips and services charges received on a particular day equally to all workers who have been on shift? What happens if some workers have worked less hours? Also, should kitchen staff, greeters, managers and other workers be included in the allocation? Clearly there will be quite a lot of detail to be worked through. Also, many employers will not be used to setting such information out in a written policy and may find this challenging or worry that a policy set out in black and white may cause disquiet amongst staff or be open to challenge. It may assist to ask workers to input into the process or consult with them and ask for their views when formulating the written policy.
Commentary
This bill has been a long time coming; originally proposed in 2016 it has been backed by numerous working groups for many years. The UK Hospitality CEO, Kate Nicholls has openly commented that this bill could help boost the “take-home” cash for employees in the hospitality sector, particularly during this cost-of-living crisis and may also aid with the recruitment and retention in this sector, which is still experiencing recruitment difficulties.
It provides good employers with an opportunity to demonstrate their commitment to fairness, although some have commented that the requirements should be “light touch” and not add to the regulatory red tape.
How we can help you
If you are a hospitality or leisure employer and have any queries around what the incoming legislation means for your company, what steps will be necessary or any other employment law needs please get in touch with Lee Jefcott.
